Investors seemed to have hit the panic button when it came to shares of CoreWeave (NASDAQ:CRWV), which shed just over 60% of its value at its worst point. More recently, the neocloud firm has come roaring back suddenly, now up over 61% from the late-March lows. Undoubtedly, appetite for expensive (or at least expensive-looking) hyper-growth stocks faded in a big-time way in the past few quarters.
With the firm winning some fresh AI deals and analyst upgrades, perhaps there are more than a few reasons to believe that the newfound momentum in the name has staying power, especially as the AI trade starts getting hot again, with semiconductors and infrastructure leading the charge.
The big deals just keep coming for CoreWeave. Perhaps there was something more than investors missed
Whether we’re talking about the smaller multi-billion-dollar deals, the more sizeable hyperscale contracts, or deals with AI model makers at the frontier (think Anthropic), the pace of deal-making is moving the needle. But just because the most remarkable deals are in the books doesn’t mean new deals or an extension of such deals can’t be in the cards, especially if CoreWeave delivers well.
In any case, it’s not just who CoreWeave is dealing with, but the length of the partnership. Indeed, it’s clear that a lot of tech titans are looking to play the long game as firms look to get as much compute as they can get.
With a packed backlog, the future is becoming less and less cloudy when it comes to the earnings growth trajectory. At this juncture, AI demand is in such a spot that it seems like any additional compute CoreWeave can secure is going to get gobbled up in record time. With a spot at the front of the line when it comes to Nvidia (NASDAQ:NVDA | NVDA Price Prediction) chips, perhaps CoreWeave’s durable competitive advantage was underestimated.
Either way, it’s not just CoreWeave’s favorably spot that’ll allow it to get served the latest and greatest GPUs first that makes the name worth owning, but the additional value it brings on top.
CoreWeave’s Mission Control agent, which is described as the operating system for AI, may very well be as much of a main attraction as its ability to procure the latest and greatest Nvidia GPUs. As investors realize the extra value CoreWeave brings to the table (greater operating and capital efficiencies), perhaps the stock can make up even more of the ground it has lost since its peak nearly a year ago.
Analysts have become a whole lot more bullish in recent weeks
Sell-side analysts aren’t just warming up to CoreWeave stock again, but some of the price target upgrades have been quite substantial.
Macquarie’s Paul Golding, who views CoreWeave as having what it takes to be a “structural player into the next decade,” hiked its price target by more than $30.00 to $125.00 per share. And, more recently, Wolfe Research’s Alex Zukin slapped a $150.00 target on shares, praising the firm for its financing model and potential margin gains. I think Golding and Zukin are both right on the money.
As CoreWeave’s offering proves stickier while its agentic offering begins to flex its muscles, I think there’s a case for significant margin upside over time. Add the heated AI compute demand into the equation and secured seat at the Vera Rubin table into the equation, and it’s not so much of a mystery as to why shares are finally coming back into favor.
Of course, if the AI trade cools again, CoreWeave might run into a brick wall. There’s quite a bit of debt weighing down the balance sheet. Though, the debt-to-backlog ratio has to be comforting to the AI bulls.
For the most part, I do think the catalysts up ahead might still be underestimated by investors, especially at a relatively reasonable 9.4 times price-to-sales (P/S).
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